LONDON. Oct 9: The dollar nosedived against the yen in spectacular fashion on Thursday on the London market to hit its lowest level against that currency in 16 months, victimized by massive dollar sales triggered by sowrry about the US economy, reports AFP.

But the greenback rallied later in the session to stand in late afternoon at 119.98 yen. after having plummeted to 111.73 yen at mid-session — a far cry from the 123.95 -yen reading noted on Wednesday evening.

The greenback also lost ground against European currencies, standing in late afternoon at 1.6089 marks compared with 1.6131 Wednesday evening, and 1.2974 Swiss francs against 1.3185. The dollar had fallen briefly below 1.59 marks and 1.28 Swiss francs during the afternoon.

Rumours of intervention by central banks in the dollar's behalf, denied by the US Federal Reserve, enabled the dollar to stage a timid rally in late afternoon.